Wisconsin native, conservative critic of everything.
"Once abolish the God, and the government becomes the God." ---G K Chesterton
"The only objective of Liberty is Life" --G K Chesterton
"Fallacies do not cease to be fallacies because they become fashions" --G K Chesterton
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling

Wednesday, December 14, 2011

Romney's "Capitalism" Problem

I'm sure that the Romney Boyzzzzz can explain this.

They'll have to--several times--if he gets the nomination.

In 1992, Bain Capital acquired American Pad & Paper, or Ampad, from Mead Corp., embarking on a ”roll-up strategy” in which a firm buys up similar companies in the same industry in order to expand revenues and cut costs....

(The product has been crappy ever since, by the way. I know, because I use a lot of Ampad's stuff.)

Anyhoo, Ampad then purchased a number of like firms, but eventually went BK, but not before spending a lot of money on...............Romney and Bain Capital.

Bain Capital, however, made money – and lots of it. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million – in addition to fees for arranging the deal.

Bain Capital took millions more out of Ampad by charging it $2 million a year in management fees, plus additional fees for each Ampad acquisition. In 1995 alone, Ampad paid Bain at least $7 million. The next year, when Ampad began selling shares on public stock exchanges, Bain Capital grabbed another $2 million fee for arranging the initial public offering – on top of the $45 million to $50 million Bain reaped by selling some of its shares. Legal Insurrection quoting Boston Globe

The "management fees" and "transaction fees" are cute ways of saying "rape/robbery". Ampad actually HAD management in place. Had the management of Mead/Ampad been so inclined, they could have--on their own--embarked on exactly the same acquisition spree that Bain did.

What is even more interesting is that Romney/Bain also funded Staples. Staples' buying leverage eventually dragged Ampad's margins into the no-longer-sufficient category, which caused Ampad's bankruptcy.

While it's licit to refer to all this as "just business," that's not how it plays out to normal people. To normal people, it looks like looting. And it was.